Assetz® News - UK property market in good form

UK property market in good form

4th April 2006 |

Moving into April, the property market in the UK remains strong and confidence continues to rise in hopeful anticipation of a long period of steady growth.

While throughout the majority of 2005 many investors failed to add to their property portfolios, the cut to interest rates in August meant that confidence began to rise steadily in the winter months.

Sceptics were still worried that the buoyancy was temporary, but with house prices continuing to rise in each of the last four months, it seems increasingly likely that the outlook is positive.

Such is the strength of the market, the Bank of England has refused to lower rates again, in fear that it will spark the property boom that it is keen to avoid.

Releasing its current forecasts, mortgage bank Northern Rock suggested that 2006 will be an improved year throughout the housing market, underpinned by the return of first-time buyers.

Observing a "small but encouraging increase" in the number of first-time buyers already, Northern Rock proposed that this will be crucial in ensuring confidence remains high.

"We expect this gentle trend to continue, providing increased support to the home-moving market, which is expected to see a slight increase in the number of housing transactions compared to 2005," read a statement from the company.

It seems that demand for houses is also rising, with home builder Bellway indicating it is similarly enthusiastic about the year.

The company's pre-tax profit was actually down by 2.1 per cent in the six months to January when compared to the previous year, but this has not dented confidence.

The order book for 2006 has reached £715 million and 92 per cent of the company's annual target has been secured, leading chairman Howard Dawe to predict much better months ahead.

"February and March have shown early signs of improvement in the market with sales not being as incentive-led as in 2005 and we remain cautiously optimistic at this stage," said Mr Dawe.

The Chartered Institute for Purchasing and Supply has in fact said that construction growth reached a six-month high in March, spurred on by house-building which grew at the fastest pace for more than two years.

It is clearly related to the recovery in the housing market at large, with a 59.6 per cent rise in house building far higher than had been anticipated.

In terms of property investment, the confidence can only be a good thing, with buyers again eager to climb the property ladder.

With the Office of the Deputy Prime Minister saying that the number of households in the UK will increase by around 209,000 a year for the next ten years, it certainly seems that demand will at least meet supply, meaning favourable conditions for astute investors.